Does Unemployment Worsen Babies’ Health? A Tale of Siblings, Maternal Behaviour and Selection

Abstract

We study the effect of unemployment on birth outcomes by exploiting geographical variation in the unemployment rate across local areas in England, and comparing siblings born to the same mother via family fixed effects. Using rich individual data from hospital administrative records between 2003 and 2012, babies' health is found to be strongly procyclical. A one-percentage point increase in the unemployment rate leads to an increase in low birth weight and preterm babies of respectively 1.3 and 1.4%, and a 0.1% decrease in foetal growth. We find heterogenous responses: unemployment has an effect on babies' health which varies from strongly adverse in the most deprived areas, to mildly favourable in the most prosperous areas. We provide evidence of three channels that can explain the overall negative effect of unemployment on new-born health: maternal stress; unhealthy behaviours -namely excessive alcohol consumption and smoking; and delays in the takeup of prenatal services. While the heterogenous effects of unemployment by area of deprivation seem to be explained by maternal behaviour. Most importantly, we also show for the first time that selection into fertility is the main driver for the previously observed, opposite counter-cyclical results, e.g., Dehejia and Lleras-Muney (2004). Our results are robust to internal migration, different geographical aggregation of the unemployment rate, the use of gender-specific unemployment rates, and potential endogeneity of the unemployment rate which we control for by using a shift-share instrumental variable approach. JEL Classification:E24, I10, I12, J13

The impact of unemployment benefits on birth outcomes: Quasi-experimental evidence from European linked register data

“…On the one hand, unemployment can be expected to affect fetal development through stress that results from the reduced financial well-being, perceived pressure to find a new job, changes in daily routines and self-perception that follow job loss [ 1 , 40 ]. Financial difficulties have been shown to lead to more negative health behaviors such as smoking and drinking [ 9 , 20 , 42 ]. On the other hand, the impact of unemployment on newborn health could run through less purchasing power [ 9 ].…”

“…Financial difficulties have been shown to lead to more negative health behaviors such as smoking and drinking [ 9 , 20 , 42 ]. On the other hand, the impact of unemployment on newborn health could run through less purchasing power [ 9 ]. If couples depend on the benefit income of the unemployed partner to afford healthy nutrition and adequate pre-natal care, the loss of that income could cause a less healthy diet or underuse of healthcare during critical periods of fetal development.…”

“…The effect of job loss on childbirth outcomes likely stems from maternal stress, increased smoking and drinking, and insufficient nutrition and perinatal healthcare access [ 9 , 16 ]. Social insurance and assistance programs are designed to counteract these negative effects, helping individuals maintain consumption and reduce financial distress.…”